Should Saudi Pharmaceutical Industries and Medical Appliances (TADAWUL:2070) Be Disappointed With Their 50% Profit?

The simplest way to invest in stocks is to buy exchange traded funds. But investors can boost returns by picking market-beating companies to own shares in. For example, the Saudi Pharmaceutical Industries and Medical Appliances Corporation (TADAWUL:2070) share price is up 50% in the last year, clearly besting the market return of around 6.9% (not including dividends). If it can keep that out-performance up over the long term, investors will do very well! Looking back further, the stock price is 42% higher than it was three years ago.

Check out our latest analysis for Saudi Pharmaceutical Industries and Medical Appliances

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During the last year Saudi Pharmaceutical Industries and Medical Appliances grew its earnings per share (EPS) by 29%. Though we do note extraordinary items affected the bottom line. This EPS growth is significantly lower than the 50% increase in the share price. So it's fair to assume the market has a higher opinion of the business than it a year ago.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

We know that Saudi Pharmaceutical Industries and Medical Appliances has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus revenue forecasts.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Saudi Pharmaceutical Industries and Medical Appliances' TSR for the last year was 52%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

We're pleased to report that Saudi Pharmaceutical Industries and Medical Appliances shareholders have received a total shareholder return of 52% over one year. And that does include the dividend. That gain is better than the annual TSR over five years, which is 11%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Even so, be aware that Saudi Pharmaceutical Industries and Medical Appliances is showing 2 warning signs in our investment analysis , you should know about...

But note: Saudi Pharmaceutical Industries and Medical Appliances may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on SA exchanges.

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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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